Here's Why We Might Be Heading Toward Another Government Shutdown Fight

Fourteen Republican senators have written a letter to House Speaker John Boehner that sets the stage for a budget showdown ahead of a government-funding deadline in December. The possibility has started to ruffle feathers in Washington weeks before the midterm elections and sparked fears of a government shutdown.

In the letter, which was spearheaded by Sen. Marco Rubio (R-Florida), the senators urged Boehner to prohibit any “unappropriated and unauthorised funds” from going toward a risk-corridor program of the Affordable Care Act. It could open the door to a replay of last year, when bickering over the healthcare law led to the first federal government shutdown in 17 years.

A Senate Democratic leadership aide who spoke to Business Insider suggested Rubio, who is expected to launch a White House bid in 2016, was trying to compete with another likely presidential hopeful, Sen. Ted Cruz (R-Texas), who was widely seen as the architect of the latest shutdown.

The stopgap spending bill needs to be passed by Dec. 11 to avert a shutdown and keep the government funded.

Republicans have charged the risk-corridor program could serve as a potential “bailout” for insurance companies. The “risk corridors” in question aim to make it easier for insurance companies to transition to the new health-care system, largely by making it less financially risky for them to sell new insurance plans on the government exchanges established by the Affordable Care Act.

The risk corridors are a temporary program scheduled to expire in 2016. Until then, the risk corridors are set up for the government to compensate insurance companies that have bigger costs than they expected while transitioning to the new system. This provision is designed to protect insurers that see an especially unhealthy pool of customers and end up with higher claims than they predicted.

This program exists because, under Obamacare’s unprecedented overhaul of the federal healthcare system, insurers’ cost of providing health insurance to an expansive new slate of customers was hard to predict.

The Department of Health and Human Services has said the risk-corridor program’s payments are “user fees” and the administration has the authority to oversee the program and its funds. But a recent decision from the non-partisan Government Accountability Office, which the Republican senators pointed to in their letter, held the funds for the risk-corridor program must be appropriated by Congress.

Because of the decision, some Republicans who oppose the risk corridors think the best way to prevent them is to block their funding in the stopgap spending bill. This forces Democrats to either abandon the program or face the prospect of another shutdown if the stopgap bill is unable to pass.

“Without that appropriation, any money spent to cover insurance company losses under the risk corridor program would be unlawful,” the senators wrote in their letter to Boehner, adding, “Unfortunately, President Obama and his administration have exhibited their intent to disregard the law and ignore the Constitution.”

“We must act to protect Congress’ power of the purse and prohibit the Obama administration from dispersing unlawful risk corridor payments providing for an Obamacare taxpayer bailout,” the senators wrote.

A consensus is emerging, however, that Republicans would most likely only take this path if they fail to win a Senate majority. Insiders doubt they would move on the strategy if they know they will have a Senate majority on Election Day since they would be in a position to eliminate the risk corridors without a budget battle.

However, control of the Senate may remain unknown immediately after Election Day due to the potential for lengthy runoffs in Georgia and Louisiana. In this scenario, it’s also unlikely Republicans would want to risk a high-profile confrontation with the potential for a shutdown. The GOP’s image brutally suffered after last year’s 16-day shutdown, which means lawmakers would be reluctant to provoke a similar fight if voters are heading to the polls for decisive runoffs.

Democrats have already taken notice of Rubio’s letter and have attempted to frame it as a strategy that could lead to a scene reminiscent of last year’s shutdown.

“Washington Republicans have already shown that they’re willing to shut down our government and hurt the middle class if they think it will help advance their ideological agenda,” Josh Schwerin, a spokesman for the Democratic Congressional Campaign Committee, told Business Insider. “That’s why the choice is so clearly between Republicans who will use shutdowns as leverage or Democrats who want to jumpstart the middle class.”

How likely it is Republicans will follow through on the strategy depends on who you ask. Democrats consider it a real possibility. Other analysts, observers, and aides think Rubio’s letter is more about trying to both raise his personal profile and the profile of the risk-corridor program.

Goldman Sachs economist Alec Phillips speculated in a recent note that Republicans taking back the Senate would lead to an increase in fiscal confrontations between congressional Republicans and the White House ahead of key deadlines to fund the government and raise the debt ceiling.

“The result is likely to be less predictability regarding the process surrounding major fiscal deadlines. Since the confrontation between House Republicans and the White House over the debt limit in 2011, markets have gradually become inured to fiscal brinksmanship, as these debates have started to follow a predictable pattern,” Phillips wrote.

“If Republicans win majorities in both chambers as polls currently suggest they might, that pattern seems likely to change, which could lead to renewed uncertainty ahead of future fiscal deadlines.”

One Republican Senate aide, while refusing to comment on the potential strategy, told Business Insider, if Republicans take back the Senate, party leadership would be better served separating risk corridor-related legislation from the stopgap spending bill.

The aide described GOP-authored risk-corridor legislation as something that could attract some Democratic votes and pass both chambers. That way, Republicans will have put Obama, who would be forced with a decision about whether to sign or veto the bill, in a bit of a corner without flirting with a potential shutdown.

GOP leadership in both chambers, the aide told Business Insider, should prioritise “demonstrating the kind of competence” the aide said has not been seen from current Senate Majority Leader Harry Reid.